Performance Budget

 Performance Budget

Purpose: 

• To motivate the employees about commitments to produce positive results

Salient features:

• Cost & Benefit of each activity is analysed regarding allocation of funds.

• Involves work measures, benchmarking & unit cost.

Consists of: 

1. Identify the targets and methods of evaluating performance of each unit of an Organization.

2. Taking into account of Inputs - Resources and Outputs - Services

3. To be completed within a particular Time frame

4. Allocation of Funds based on specific goals

Advantages: 

1. Improves Performance in continuous manner

2. Makes clear Program Goals/Objectives/Fixing targets for performance

3. Justifies - Reallocation of Resources on the basis of Performance.

4. Higher transparency & accountability to Taxpayers

5. Better Cost estimation enables to allocate Funds to various projects by their importance.

Limitations: 

1. Focus more on Targets, not on means of achievement

2. Focus more on Quantity, not on Quality.

3. Data may be manipulated to reach targets to get Funds

4. Becomes ineffective without a Proper system of Accounting & Reporting

1. In Govt Organizations like Indian Railways with multiple agencies, disagreement may arise on Spending priorities.